Positive Reaction
A number of stock brokerage firms in Korea advised investors to focus more on Chinese stocks on Jan. 5, one day after the Chinese stock market’s 7 percent plunge and unprecedented double circuit breakers. The firms’ consensus is that the plunge was because of a short-term burden.
“The Chinese stock market is likely to have to go through some difficulties for a short while but any additional downfall similar to that between June and August last year is rather unlikely,” Korea Investment & Securities said.
Shinhan Investment Corporation also mentioned that the plunge was because of lifting of the ban on stock sales by the largest shareholders and an increase in the volatility regarding the yuan exchange rate. “In view of interest rate and credit indices, it seems that the stock market volatility does not have to be regarded as an overall financial market risk,” it explained.
“The Chinese stock market became far more attractive in terms of valuation after the panic during the first session of this year,” Samsung Securities remarked, continuing, “The Shanghai Index has a PER of 12.7 and a PBR of 1.5, 10.8 percent and 28.5 percent discounted compared to the latest 10-year average, respectively.”
Korea Investment & Securities added that the Chinese government is expected to take stimulus measures in a hurry in the wake of the panic, and investors would be wise to prepare to enjoy them.